Income Tax Return filing: Tax changes to keep in mind while filing ITR for AY2020-21

The ITR filing due date has been extended for AY 2020-21 until December 31, 2020, and January 31, 2021, for tax audit cases. The ITR forms notified carry some significant changes, such as reporting requirements, tax deductions, and changes to the 2019 budget. Taxpayers should keep these changes in mind while filing their ITR for AY 2020-21 (FY 2019-20).

Budget 2019  introduced the interchangeability of PAN and Aadhaar. A person who does not have a PAN can list Aadhaar at various ITR locations. For example, ITRs enable quoting of Aadhaar in the case of the buyer of the real property, the tenant while reporting income from the homeownership, or the presentation of ITR by the resident representative, etc.

The ITR also includes new standards introduced for mandatory filing of tax returns even though the total per capita gross income is below the base exemption limit. The compulsory filing is applicable in case any of the below criteria are satisfied:

1. Deposit in one or more current account(s), an amount or the total of amounts exceeding Rs 1 crore during the FY 2019-20
2. Travel expenses to a foreign country incurred of an amount  exceeding Rs 2 lakh  in total for self  or anyone else

Expenditure on the consumption of electricity exceeding Rs 1 lakh in total during the 2019-20 fiscal year.

The government granted additional time until July 31, 2020, to make tax-saving investments for the 2019-20 fiscal year. ITRs provide a DI schedule for disclosure of investment details and deduction of claims. Likewise, the ITRs also provides for the disclosure of capital gains exemptions for investments made through September 30 for exemptions under Section 54 to 54 GB.

ITRs also require disclosure of the name of the company in which a person is a director or shareholder of unlisted shares.

The ITRs provide an expanded list of the nature of employment to include the bifurcation between the central government and state government employees. In addition, another category is included for "does not apply, for example, family pension."

The income tax deduction under Section 87A has been increased to Rs 12,500 for a total income of Rs 5 lakh. Consequently, ITRs allows a tax deduction of up to Rs 12,500 for resident natural persons whose total income (after claiming the deductions and exemptions) does not exceed Rs 5 lakh. The discount amount was Rs 2,500  in the last year 2019-20 with a total income of Rs 3.5 lakh. Income tax returns will be submitted compulsorily if the total gross income is greater than the basic exemption of Rs 2.5 lakh. A deposit is required even if the individual qualifies for a deduction and has no tax liability.

The 2020-21 standard deduction allowed in Wage Income has been increased to Rs 50,000 from Rs 40,000.

As of AY 2020-21, when reporting income from homeownership, two properties can be classified as "self-occupied." Until 2019-2020, an individual with a second vacant home property would have to pay the hypothetical rental taxes calculated for that property.

The 2019 budget modified the capital gains exemption under Section 54 to allow one claim to buy or build two residential properties instead of one to claim a deduction. This condition for claiming this discount is that it can only be used once in a lifetime and that the long-term capital gains arising must be less than Rs 2 crore.

The ITRs also provide for a claim for an additional interest deduction under Section 80EEA for Affordable Homes in the case of a first-time home purchase where the property stamp value does not exceed Rs 45 lakh. The maximum deduction allowed is Rs 1.50,000 on a loan made by an individual from any financial institution. Likewise, the ITRs carry a provision for the interest deduction introduced in the 2019 budget for loans taken for the purchase of electric vehicles.

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